Certified Government Financial Manager (CGFM) Practice Exam 2025 - Free CGFM Practice Questions and Study Guide

Question: 1 / 875

What characteristic distinguishes a revenue bond from other bonds?

It is only secured by the issuer's general credit

It must be paid off within a single fiscal year

Its repayment is sourced primarily from specific revenue streams

The defining characteristic of a revenue bond is that its repayment is sourced primarily from specific revenue streams. Unlike general obligation bonds, which are backed by the issuer's full faith and credit and taxing power, revenue bonds are secured through the income generated from designated projects or revenue sources, such as user fees or service charges. This means that the funds collected from the particular services related to the bond are used to pay the bondholders, making it essential that the associated revenues are sufficient to meet the repayment obligations.

This characteristic delineates revenue bonds from other types of bonds, as it focuses on a specific revenue source rather than the broader financial backing provided by an issuer's entire credit spectrum. Understanding this distinction is crucial for financial management professionals assessing the risk and reliability of bond investments.

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It has a guarantee of federal funding

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